In this post, I want to get into what’s arguably the most important part of any cannabis M&A transaction – the purchase price and how it’s paid. There are virtually infinite ways to structure payment in these transactions, but we’ll take a look today at some of the most common structures and issues.
To make the most sense of this, I’ll break the post into two parts: 1) purchase price and 2) payment and escrow. In my next post, I’ll discuss the ways that purchase prices can be adjusted pre-closing and post-closing.
Part 1: Purchase Price
The purchase price for a cannabis business is obviously one of the most heavily negotiated aspects of M&A deals. I don’t intend to get into how business are valued today, but to actually look at how parties settle on a purchase price.
First off, there are many different ways to structure payment to sellers. Typically, payments are made in cash, stock, or some combo of the two. We tend to see straight cash purchases for smaller M&A businesses and cash-stock hybrid deals where larger companies or MSOs are the buyers, or where the purchase price is larger. It’s a lot easier for a company